E-mails: State official privately derided tech firm while publicly promoting it

By Brian Rosenthal, Austin Bureau

September 28, 2015Updated: September 28, 2015 10:05pm

AUSTIN — Former Texas health official Jack Stick tried to persuade dozens of other states to buy Austin technology company 21CT’s Medicaid fraud detection system even as he privately complained that the results it produced for Texas were worth “a bucket of warm spit,” according to his email messages.

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Stick worked for months to push the Texas Health and Human Services Commission to buy 21CT’s system, the emails show. Then, after the company got a no-bid contract in 2012, he cited supposed successes of the project to promote the system to at least 25 other states and the federal government.

The messages, obtained by the Houston Chronicle after months of delays by the commission, illustrate how Stick helped 21CT before questions about favoritism forced him to resign in December. A half-dozen other people with ties to the $110 million project have since resigned.

Stick said the emails show that he was “generally pleased with the work the state’s contractor was doing and did not hesitate to share that with other people when they asked.”

“Most importantly,” he added, “I think they show that when I thought the state’s interests were not being well or properly served, I responded immediately and firmly. The state’s interests always remained my first priority.”

A 21CT spokesman said the company “stands by the exceptional work” it did for Texas.

“While select e-mails might appear controversial and generate provocative headlines, they often draw a picture that is incomplete or inaccurate,” he said.

The e-mails reviewed by the Chronicle show that Stick and 21CT collaborated closely on an aggressive and at times inaccurate campaign of boasting.

Stick’s team sent confidential information to Ohio’s health department as part of a sales pitch about 21CT’s system. He wrote an assistant to ask her to send documents to Florida officials considering the system. He told a California official he could get the company to do a demonstration there.

Most of all, he bragged.

“Other than my kids being born, Air Force One landing and Niagara Falls,” Stick wrote to Wisconsin’s anti-fraud watchdog. “I don’t think I’ve ever seen anything quite that impressive.”

But according to the e-mails, the system struggled to conclusively identify much of any fraud, in part because of repeated delays in obtaining and ingesting data.

The delays left Stick “sorely tested and keenly disappointed,” according to an April 2014 e-mail he sent to an assistant and blindly copied to 21CT CEO Irene Williams.

“After one year of loading (Managed Care Organization), we have 10 months ingested. 10 months. That is worth next to nothing. Not even a bucket of warm spit,” wrote Stick, who at the time was preparing to ask the federal Centers for Medicare and Medicaid Services to fund a project expansion. “How can I possibly ask CMS for more. … They are properly going to ask where all the money went. This is going to be utterly humiliating when they find out.”

The assistant responded that she had been “working extremely hard” and felt that the progress was “pretty impressive” given the newness of the system.

A few weeks later, Stick not only asked federal officials for more money but urged them to expand the Texas system into a “regional hub” to identify fraud across several states.

When federal officials responded in June 2014 that they were “very interested” in the idea, Stick quickly forwarded the message to Williams.

“Confidential,” he wrote.

The regional hub never got off the ground; the expansion won tentative approval but collapsed when the project was canceled amid questions from the Chronicle and the Austin American-Statesman.

The project, which Stick led as the commission’s deputy inspector general, aimed to identify fraud as it happened with technology that could spot patterns across a wide range of data sets and social networks.

Stick told his boss he first viewed 21CT’s system in July 2011. Less than two months later, Stick said he planned to be “minutely involved in implementing and using the technology.”

“I’d like to push this hard,” Stick added.

Stick has said publicly that he pushed 21CT because he was smitten with its technology. But in a May 2014 e-mail to a 21CT staffer, he said “21CT got this deal because of Irene and Robert and Jim,” referring to Williams, her husband and another company executive.

The company has said it followed processes set by the state. It has added that its system identified $200 million in potential fraud, although the commission has said it has not confirmed or recovered any of it.

A former lobbyist for the company, meanwhile, has said Stick was angling to get a job at the company.

Hoping to gauge the explanations, the Chronicle first requested his emails shortly after he resigned. The commission initially refused, citing a criminal investigation.

The emails in this story include complaints from Stick and colleagues.

In addition to Stick’s worries about data importation, his colleagues expressed concern that 21CT’s technology was repetitive. In October 2013, an assistant wrote Stick to say a finding of potential fraud he had touted as a 21CT success had been discovered by the commission months earlier — and found to not be problematic.

“I am also curious as to why 21CT is re-creating the existing (queries) that are being run and worked by (commission) staff when I thought they were going to be developing new methods,” the assistant added.

Stick also expressed unease with how much he was helping 21CT, including in January 2014 when an aide told him the company “wants to talk to you about who you know in Oklahoma and Arizona.”

“I’m surprised at his ballsiness,” Stick responded to his secretary, comparing it to the executive saying, “‘Hey, Jack, will you be a salesman for us?’”

But that did not stop the promotion. Four days later, Stick emailed another 21CT executive a copy of a presentation he had given at a conference touting the company.

“Were they putty in your hands?” the executive asked.

“They were,” Stick said.

In addition to conferences, the emails show Stick promoted 21CT directly to dozens of other states — starting even before the project began.

In March 2012, nine months before signing the first purchase order, Stick touted 21CT’s “graph pattern analysis” in a webinar for the National Conference of State Legislatures.

Afterward, Stick told the moderator that he wanted to continue to promote 21CT because it was “too good to hide.”

In another public pitch a year later, Stick emailed 18 other Medicaid watchdogs to say 21CT’s technology had already paid for itself “many times over.”

“It looks like LYNXeon will help us double or triple the total number and dollar value of cases we identify annually,” Stick wrote. The follow-up questions poured in, including from a Connecticut official.

In a series of messages with that official, Stick at one point said 21CT “once again blew me away.”

Connecticut eventually gave 21CT a three-year contract worth an estimated $24 million — a purchase that represents Stick’s only successful sales job.

But the best illustration of Stick’s promotion campaign involves Florida.

That state got attention earlier this year because Stick’s calendar included a meeting at 21CT’s headquarters to talk about a demonstration for Florida officials. At the time, Stick told reporters he attended to view 21CT’s presentation so he “could be certain no confidential recipient information was in it.”

The emails, however, show Stick coached 21CT on the demo as part of a monthslong sales pitch.

One day in July 2013, Stick told a 21CT staffer the demo must “show them the future,” then emailed Florida Medicaid watchdog Rich Zenuch to say the event “should be good.”

Florida chose a different company for the project. But the affair was not a total loss for 21CT. Last August, it hired Zenuch to be on its executive staff.